BUSINESS LAW

The U.S. Court of Appeals here in Washington has decided that when Congress wrote "or" into the Equal Access to Justice Act (EAJA), the lawmakers really meant "and." And with the change of a conjunction, the judges may have saved the Treasury a lot of money that otherwise would go to pay private lawyers.

The EAJA was intended to be an equalizer, encouraging those who may not have the resources for a lengthy legal battle against the federal government to go ahead with the fight if they are convinced they are right. If they win, the law says, the judge hearing the case can order the government to pay its opponent's legal bills. The law expired last Oct. 1, but still applies to all cases then pending.

To distinguish between those rich enough to pay for their own lawyers and those entitled to be reimbursed, Congress set out a variety of tests. Eligible are:

*Individuals with a net worth of less than $1 million.

*Charities and similar organizations recognized as tax-exempt by the Internal Revenue Service.

*Businesses with a net worth under $5 million.

*Businesses or other organizations with fewer than 500 employes.

Last year the Court of Appeals for the Federal Circuit decided that litigants had to meet all applicable criteria to qualify for reimbursement. And with its June 4 ruling in Unification Church v. Immigration & Naturalization Service (INS), the Court of Appeals for D.C. now agrees with the other court's interpretation.

The latest case involved a bid by the Unification Church to be reimbursed for its successful suit to force the INS to let some members stay in this country. The appeals court here turned down the request because, even though the church is recognized by the IRS as a tax-exempt organization, it has about 7,000 members who solicit contributions, and the judges decided they are like employes. That means the church flunks one of the tests, and so is not qualified for aid under EAJA, Senior Circuit Judge Carl McGowan said in his decision for the appeals panel.

The ruling will have more impact on businesses than on charitable organizations, however. By reading the "or" in the statute's list of eligibility requirements as an "and," the appellate court freezes out firms with fewer than 500 employes but a net worth of more than $5 million and those with a net worth over $5 million but fewer than 500 workers. Congress meant to help those who could not help themselves, McGowan said, and making sure a business meets both measures of smallness is the best way to assure that only the truly needy benefit.

In other cases, courts ruled that:

*The Interstate Commerce Commission is going to have a lot of leeway in deciding not to regulate. The ICC now gets involved in deciding whether a railroad has set reasonable rates only if the line so dominates the market that shippers have virtually no alternative but to pay whatever rate is asked. The state of Arizona contended it was in just such a bind in having to rely on the Southern Pacific Transportation Co. for fuel oil refined in California for Arizona's electrical generating plants. The ICC ruled, however, that Southern Pacific has no such dominant position. What is significant is that the U.S. Court of Appeals here in Washington upheld the ICC decision -- even though the judges said that the commission was flat-out wrong in two of the four criteria it used to reach its decision. Southern Pacific has no real competition on the haul from other railroads or trucks, but the fact that the power plants could use natural gas instead of fuel oil, or buy fuel oil from other refiners, is enough to support the ICC ruling, the judges decided. (Salt River Project v. U.S., May 31)

*A consumer credit contract that is too favorable to the seller may not be enforceable. The Texas Supreme Court, reversing a mid-level state appellate court, threw out a used-car contract written by a General Motors dealer because it gave the dealer the right to invade the buyer's property and repossess the automobile if the buyer fell behind in payments. Under the contract terms, the dealer would not even have to ask the customer to return the car. Although two justices saw nothing wrong with that procedure, the high court majority ruled that it violated a provision in the state Consumer Credit Code that bars contracts authorizing creditors "to enter upon the buyer's premises unlawfully." (Gonzalez v. Gainan's Chevrolet, June 1)

*You can't get "personal-service income" if you don't give personal service. The Internal Revenue Service won a long-running dispute over how to treat payments made to insurance brokers for a promise that they would not compete with the new owners of their former agency. The sellers of the business insisted that the payment for their promise to stay out of the insurance business was in fact a payment for personal service, which at the time of the sale would have limited the tax bite to half the income. But the U.S. Court of Appeals in Richmond accepted the tax collectors' argument that refraining from doing something is not rendering a service -- at least as far as the Tax Code is concerned. (Furman v. U.S., June 6)

State constitutions may impose more of a limit on police activities than does the federal Bill of Rights. The Colorado Supreme Court came to that conclusion in throwing out the prosecution of a suspected manufacturer of amphetamines -- a suspect whom investigators tracked down by following a beeper that drug enforcement agents had placed on a drum of phenylacetic acid, a key ingredient in making the illicit drug. The U.S. Supreme Court has approved such a tracking technique, but the Colorado justices ruled that under their state constitution, such a practice amounts to an illegal search. The acid was purchased openly from a chemical company, and buyers have a right to expect privacy in such commercial transactions, the opinion said. (People v. Oates, May 6)